State Farm has been given the green light for an emergency rate hike for homeowners' insurance.
The request came after the destructive Los Angeles wildfires in January, which resulted in State Farm paying out $3.5 billion in claims.
“I think it’s understandable because they are trying to spread their risk out, but it sure is a big hit to homeowners,” said Terry Eselun, Los Osos resident.
“We’re facing unprecedented losses in California at levels that have never been seen before. Every year we say it’s been a record-breaking year, and the very next year we break it,” said Chris Raders, Ted Hamm Insurance owner.
State Farm is the largest insurer with 2.8 million polices across the state. Policyholders can expect an increase of 17% for homeowners, 15% for owners, and 38% for rental dwellings like apartments.
“It keeps trickling down to the consumer,” said Diann Davisson, Los Osos resident.
“If every year you have exceptional losses, the only way to offset that is by increasing costs to the consumers, which is really difficult,” Raders said.
Eselun lives in Los Osos and also owns rental property in Southern California.
“We just got a notice from Farmers that it will increase 100%. It went from $1,200 a year and increased to $2,200 a year,” Eselun said.
She says an increase like this impacts her budget.
“Being on a fixed income and retired, it really makes a big difference that we will have to figure out how to manage that.”
Davisson was recently dropped from State Farm after 40 years.
“It was very disappointing. I know with the fires in Los Angeles, everybody is getting the brunt of the increase in our insurance,” she said.
Raders says there are other insurance companies out there, but switching can be difficult.
“Moving your insurance right now in the insurance market that we’re in right now is very challenging. Make sure you’ve covered all your bases before you make a switch,” Raders said.
As far as what the rate hike will look like long term, Raders said, “The emergency rate hike was given, but it still has to be reviewed and approved long term for it to stick.”
The emergency rate hike will take effect on June 1.
